Texas Annual Report: Everything You Need to Know
A Texas Annual Report is a yearly business report filed by companies conducting business in Texas. 5 min read
What is the Texas Annual Report?
A Texas Annual Report is a yearly business report filed by companies conducting business in Texas. While the Texas Secretary of State doesn’t require a Limited Liability Company (LLC), Limited Liability Partnership (LLP), or corporation to file an annual report with the State, other types of annual reports, including periodic reports, may be required depending on the type of business you operate.
Types of Annual Reports
- Application Report: For an LLP, an application report must be filed on a yearly basis with the Texas Secretary of State.
- Annual Statement of a Professional Association. This annual statement must be filed by a professional association.
- Periodic Report of a Limited Partnership. This periodic report must be filed by a LP, not annually, but periodically usually once every four years.
- Certificate of Reinstatement of a Professional Association after Failure to File Annual Statement. This form must be filed by a professional association that failed to file an annual statement. Therefore, before the entity can begin conducting business again in the State of Texas, it must first file this certificate of reinstatement. Late fees will also apply.
- Application for Reinstatement of Limited Liability Partnership Status. This form should be used by a partnership when applying for reinstatement after having failed to file an annual report. Late fees will also apply in this situation.
- Application for Reinstatement. This form is used for a business that is applying for reinstatement after having either ceased business voluntarily or having its business certificate revoked, for reasons other than a failure to file the annual statement.
- Reports Unit Payment Form. This form is to be used when transmitting credit card or any type of payment information via fax.
Texas Franchise Tax Report
Since LLCs, LLPs, and corporations aren’t required to file an annual report, they instead submit an information report while paying yearly franchise tax. Such filing is submitted to the Texas Comptroller of Public Accounts (CPA). The first franchise tax report is due May 15 of the year after your first filing in the State of Texas. Therefore, if you established your business in July 2016, then your initial franchise tax report would be due May 15, 2017.
The report itself can be rather complex and tedious. You should seek the help of your accountant to ensure that all items are filled out properly. The franchise report fees are as follows:
- 0.575 percent for companies with $10 million or less in annual revenue and filing via the E-Z Computation form
- Texas nonprofit and foreign companies: $5
- Texas domestic/foreign LPs: $50
- Texas law enforcement/military charities: $50. Note that most charities in Texas are unregulated. However, if the charity raises money that will benefit military or law enforcement, then this fee applies.
If you operate Texas Limited Partnership (LP), periodic reports are also required to be filed at least once every four years.
Texas LLC: Frequently Asked Questions
When starting a business in Texas, regardless of whether it operates as a LLC, LLP, corporation, nonprofit organization, or charity, you may have several questions. Mostly, your questions will pertain to how to establish your business, permits and licenses required, and how you’re going to make money to stay afloat. However, just as important are the annual filings that you must abide by in order to keep your business running. Below are some common questions pertaining to Texas LLCs, including what types of reports are required when conducting business in the State of Texas.
- Does Texas have initial report requirements?
No. Your report is not due until the calendar year after you establish your business in Texas. As previously mentioned, the report will be due May 15 in the year after you’re established your business.
- What will happen if I fail to file a Texas Franchise Tax Report?
There is a $50 penalty fee for a late filing, in addition to a 5 percent tax penalty. However, if you failed to file within 30 days from the due date, another 5 percent penalty will be applied. Note that, for nonprofits, a monthly late fee of $1 is imposed. Further, a monthly late fee of $25 is imposed on all Texas LP periodic reports.
- Who can file Texas Franchise Tax Reports?
For LLCs, an officer or director of the company can file. For all other businesses, a partner or registered agent can file the report.
- What kind of state business tax will I owe?
LLCs are generally referred to as pass-through tax entities, meaning that the business itself is not required to pay federal income taxes. Instead, the taxes are passed through to the members of the business. However, in Texas, a state franchise tax is imposed on the business itself, which is paid to the CPA. Even if an LLC wishes to be treated as a corporation for tax purposes, this fee is still applied. The amount being taxed is dependent on what is called the net surplus, which is calculated by subtracting the members’ contributions from the net assets of the LLC. In order to pay such tax, you have several options, including using either the E-Z Computation or Long Form. If, however, no franchise tax is due by the LLC, you can file what’s called a “No Tax Due Information Report.”
- What kind of state employer tax will I owe?
If you hire employees, you’ll have to pay employer taxes. While some taxes are paid directly to the federal government, other state taxes apply. First and foremost, you will need to register for unemployment insurance. In the event that you terminate an employment contract with one of your employees, you’ll need to utilize such insurance, which is handled through the Texas Workforce Commission (TWC). These taxes are due on a quarterly basis.
- How much will my sales and usage taxes be?
If your LLC will be selling products to prospective customers, you will need to collect and pay sales tax. This is a rather easy concept to understand. Any product you sell will include a sales tax. Therefore, you will collect the tax and subsequently pay sales taxes periodically for those goods sold. You can register for a sales tax permit online, through the mail, or apply in person at a CPA field office.
- What about registration in other states?
If you plan on conducting business outside of Texas, you might need to register your LLC in each state. Check with each state’s Secretary of State website for additional details on whether or not registration is necessary, as well as any other requirements and fees that may apply in order to conduct business in those states. Be mindful that something as insignificant as soliciting business in another state (or even through the internet) can amount to doing business in that state.
If you are ready to create your Texas entity, and have questions regarding what types of reports you may need to file, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.